The Pictures in Our Heads (1)

"Two elephants were discussing life in general on Earth.

'You know,' said one, 'humans say that we possess the best memories of any animals on the globe.'

'Well,' said the other, 'why can’t I remember where I left my bag of peanuts?' said the Moon when she began orbiting overheads, slowly, silently, like Cinderella, walked the night in her silver shoon, after saying Basmalah and greeting with Salaam.

"A century ago," continued the Moon, "Walter Lippmann told a story, 'There is an island in the ocean where in 1914 a few Englishmen, Frenchmen, and Germans lived. No cable reaches that island, and the British mail steamer comes but once in sixty days. In September it had not yet come, and the islanders were still talking about the latest newspaper which told about the approaching trial of Madame Caillaux for the shooting of Gaston Calmette. It was, therefore, with more than usual eagerness that the whole colony assembled at the quay on a day in mid-September to hear from the captain what the verdict had been. They learned that for over six weeks now those of them who were English and those of them who were French had been fighting in behalf of the sanctity of treaties against those of them who were Germans. For six strange weeks they had acted as if they were friends, when in fact they were enemies.

But their plight was not so different from that of most of the population of Europe. They had been mistaken for six weeks, on the continent the interval may have been only six days or six hours. There was an interval. There was a moment when the picture of Europe on which men were conducting their business as usual, did not in any way correspond to the Europe which was about to make a jumble of their lives. There was a time for each man when he was still adjusted to an environment that no longer existed. All over the world as late as July 25th men were making goods that they would not be able to ship, buying goods they would not be able to import, careers were being planned, enterprises contemplated, hopes and expectations entertained, all in the belief that the world as known was the world as it was. Men were writing books describing that world. They trusted the picture in their heads. And then over four years later, on a Thursday morning, came the news of an armistice, and people gave vent to their unutterable relief that the slaughter was over. Yet in the five days before the real armistice came, though the end of the war had been celebrated, several thousand young men died on the battlefields.

Looking back, we can see how indirectly we know the environment in which, nevertheless, we live. We can see that the news of it comes to us, now fast, now slowly; but that whatever we believe to be a true picture, we treat as if it were the environment itself. It is harder to remember that about the beliefs upon which we are now acting, but in respect to other peoples and other ages, we flatter ourselves that it is easy to see when they were in deadly earnest about ludicrous pictures of the world. We insist, because of our superior hindsight, that the world as they needed to know it, and the world as they did know it, were often two quite contradictory things. We can see, too, that while they governed and fought, traded and reformed in the world as they imagined it to be, they produced results, or failed to produce any, in the world as it was. They started for the Indies and found America. They diagnosed evil and hanged old women. They thought they could grow rich by always selling and never buying.

[...] A monk named Cosmas, famous for his scientific attainments, was therefore deputed to write a Christian Topography, or 'Christian Opinion concerning the World.' It is clear that he knew exactly what was expected of him, for he based all his conclusions on the Scriptures as he read them. It appears, then, that the world is a flat parallelogram, twice as broad from east to west as it is long from north to south. In the center is the earth surrounded by ocean, which is in turn surrounded by another earth, where men lived before the deluge. This other earth was Noah's port of embarkation. In the north is a high conical mountain around which revolve the sun and moon. When the sun is behind the mountain it is night. The sky is glued to the edges of the outer earth. It consists of four high walls which meet in a concave roof, so that the earth is the floor of the universe. There is an ocean on the other side of the sky, constituting the “waters that are above the firmament.” The space between the celestial ocean and the ultimate roof of the universe belongs to the blest. The space between the earth and sky is inhabited by the angels [at that time, the Christians were told to not even spokes the Antipodes, the direct opposite].

[...] For Cosmas there was nothing in the least absurd about his map. Only by remembering his absolute conviction that this was the map of the universe can we begin to understand how he would have dreaded Magellan or Peary or the aviator who risked a collision with the angels and the vault of heaven by flying seven miles up in the air. In the same way we can best understand the furies of war and politics by remembering that almost the whole of each party believes absolutely in its picture of the opposition, that it takes as fact, not what is, but what it supposes to be the fact.

[...] Great men, even during their lifetime, are usually known to the public only through a fictitious personality. Hence the modicum of truth in the old saying that no man is a hero to his valet. There is only a modicum of truth, for the valet, and the private secretary, are often immersed in the fiction themselves. Royal personages are, of course, constructed personalities. Whether they themselves believe in their public character, or whether they merely permit the chamberlain to stage-manage it, there are at least two distinct selves, the public and regal self, the private and human. The biographies of great people fall more or less readily into the histories of these two selves. The official biographer reproduces the public life, the revealing memoir the other. The Charnwood Lincoln, for example, is a noble portrait, not of an actual human being, but of an epic figure, replete with significance, who moves on much the same level of reality as Aeneas or St. George. Oliver's Hamilton is a majestic abstraction, the sculpture of an idea, “an essay” as Mr. Oliver himself calls it, “on American union.” It is a formal monument to the state-craft of federalism, hardly the biography of a person. Sometimes people create their own facade when they think they are revealing the interior scene. The Repington diaries and Margot Asquith's are a species of self-portraiture in which the intimate detail is most revealing as an index of how the authors like to think about themselves.

[...] But beside hero-worship there is the exorcism of devils. By the same mechanism through which heroes are incarnated, devils are made. If everything good was to come from Joffre, Foch, Wilson, or Roosevelt, everything evil originated in the Kaiser Wilhelm, Lenin and Trotsky. They were as omnipotent for evil as the heroes were omnipotent for good. To many simple and frightened minds there was no political reverse, no strike, no obstruction, no mysterious death or mysterious conflagration anywhere in the world of which the causes did not wind back to these personal sources of evil.

Worldwide concentration of this kind on a symbolic personality is rare enough to be clearly remarkable, and every author has a weakness for the striking and irrefutable example. The vivisection of war reveals such examples, but it does not make them out of nothing. In a more normal public life, symbolic pictures are no less governant of behavior, but each symbol is far less inclusive because there are so many competing ones. Not only is each symbol charged with less feeling because at most it represents only a part of the population, but even within that part there is infinitely less suppression of individual difference. The symbols of public opinion, in times of moderate security, are subject to check and comparison and argument. They come and go, coalesce and are forgotten, never organizing perfectly the emotion of the whole group. There is, after all, just one human activity left in which whole populations accomplish the union sacr'ee. It occurs in those middle phases of a war when fear, pugnacity, and hatred have secured complete dominion of the spirit, either to crush every other instinct or to enlist it, and before weariness is felt.

At almost all other times, and even in war when it is deadlocked, a sufficiently greater range of feelings is aroused to establish conflict, choice, hesitation, and compromise. The symbolism of public opinion usually bears, the marks of this balancing of interest. Think, for example, of how rapidly, after the armistice, the precarious and by no means successfully established symbol of Allied Unity disappeared, how it was followed almost immediately by the breakdown of each nation's symbolic picture of the other: Britain the Defender of Public Law, France watching at the Frontier of Freedom, America the Crusader. And think then of how within each nation the symbolic picture of itself frayed out, as party and class conflict and personal ambition began to stir postponed issues. And then of how the symbolic pictures of the leaders gave way, as one by one, Wilson, Clemenceau, Lloyd George, ceased to be the incarnation of human hope, and became merely the negotiators and administrators for a disillusioned world.

Whether we regret this as one of the soft evils of peace or applaud it as a return to sanity is obviously no matter here. Our first concern with fictions and symbols is to forget their value to the existing social order, and to think of them simply as an important part of the machinery of human communication. Now in any society that is not completely self-contained in its interests and so small that everyone can know all about everything that happens, ideas deal with events that are out of sight and hard to grasp.

[...] The only feeling that anyone can have about an event he does not experience is the feeling aroused by his mental image of that event. That is why until we know what others think they know, we cannot truly understand their acts.

[...] In all these instances we must note particularly one common factor. It is the insertion between man and his environment of a pseudo-environment. To that pseudo-environment his behavior is a response. But because it is behavior, the consequences, if they are acts, operate not in the pseudo-environment where the behavior is stimulated, but in the real environment where action eventuates. If the behavior is not a practical act, but what we call roughly thought and emotion, it may be a long time before there is any noticeable break in the texture of the fictitious world. But when the stimulus of the pseudo-fact results in action on things or other people, contradiction soon develops. Then comes the sensation of butting one's head against a stone wall, of learning by experience, and witnessing Herbert Spencer's tragedy of the murder of a Beautiful Theory by a Gang of Brutal Facts, the discomfort in short of a maladjustment. For certainly, at the level of social life, what is called the adjustment of man to his environment takes place through the medium of fictions.

By fictions I do not mean lies. I mean a representation of the environment which is in lesser or greater degree made by man himself. The range of fiction extends all the way from complete hallucination to the scientists' perfectly self-conscious use of a schematic model, or his decision that for his particular problem accuracy beyond a certain number of decimal places is not important. A work of fiction may have almost any degree of fidelity, and so long as the degree of fidelity can be taken into account, fiction is not misleading. In fact, human culture is very largely the selection, the rearrangement, the tracing of patterns upon, and the stylizing of, what William James called 'the random irradiations and resettlements of our ideas.'

[...] The analyst of public opinion must begin then, by recognizing the triangular relationship between the scene of action, the human picture of that scene, and the human response to that picture working itself out upon the scene of action. It is like a play suggested to the actors by their own experience, in which the plot is transacted in the real lives of the actors, and not merely in their stage parts. The moving picture often emphasizes with great skill this double drama of interior motive and external behavior. Two men are quarreling, ostensibly about some money, but their passion is inexplicable. Then the picture fades out and what one or the other of the two men sees with his mind's eye is reacted. Across the table they were quarreling about money. In memory they are back in their youth when the girl jilted him for the other man. The exterior drama is explained: the hero is not greedy; the hero is in love.'

That was a piece of ideas from Walter Lippmann, the intellectual father of the idea now called, for short, agenda-setting. The opening chapter of his 1922 classic, Public Opinion, is titled 'The World Outside and the Pictures in our Heads', and summarizes the agenda-setting idea even though Lippmann did not use that phrase. His thesis is that the news media, our windows to the vast world beyond direct experience, determine our cognitive maps of that world. Public opinion, argued Lippmann, responds not to the environment, but to the pseudoenvironment constructed by the news media.

Still in print more than ninety years after its original publication, Public Opinion presents an intriguing array of anecdotal evidence to support its thesis. Lippmann begins the book with a compelling story of ‘an island in the ocean where in 1914 a few Englishmen, Frenchmen, and Germans lived’.

Only the arrival of the mail steamer more than six weeks after the outbreak of the First World War alerted these friends to the fact that they were enemies. For Lippmann, who was writing in the 1920s, these are contemporary updates of Plato's Allegory of the Cave, with which he prefaces the book. Paraphrasing Socrates, he noted ‘how indirectly we know the environment in which nevertheless we live … but that whatever we believe to be a true picture, we treat as if it were the environment itself’.

So, why Public Opinion? We'll see in the next session. Bi 'idhnillah."

Then the Moon hummed,

Sometimes you picture me

I'm walking too far ahead

You're calling to me,

I can't hear what you've said

Then you say, 'Go slow, I fall behind!' *)

[Session 2]

Bahasa

Moneylending, in Shakspeare's Play (3)

"In mathematics, the Pythagorean theorem or Pythagoras' theorem is a fundamental relation in Euclidean geometry between the three sides of a right triangle. It states that the area of the square whose side is the hypotenuse (the side opposite the right angle) is equal to the sum of the areas of the squares on the other two sides.

Maybe it could be likened to this, there were three medieval kingdoms on the shores of a lake that shaped rectangled triangle. There was an island in the middle of the lake, over which the kingdoms had been fighting for years. Finally, the three kings decided that they would send their knights out to do battle, and the winner would take the island.

The night before the battle, the knights and their squires pitched camp and readied themselves for the fight.

The first kingdom, was very rich, had 12 knights, and each knight had 5 squires, all of whom were busily polishing armor, brushing horses, and cooking food.

The second kingdom, even richer, had 20 knights, and each knight had 10 squires. Everyone at that camp was also busy preparing for battle, all of them were busily polishing armor, brushing horses, and cooking food.

At the camp of the third kingdom, because they were destitute, there was only one knight, with his squire. This squire took a large pot and hung it from a looped rope in a tall tree. He busied himself preparing the meal, while the knight polished his own armor. Both of them could relax, ete and got enough sleep, to prepare the battle.

When the hour of the battle came, the three kingdoms sent their squires out to fight (this was too trivial a matter for the knights to join in). The battle raged, and when the dust had cleared, the only person left was the lone squire from the third kingdom, having defeated the squires from the other two kingdoms. Thus proving that the squire of the high pot and noose is equal to the sum of the squires of the other two sides."

The moon continued by saying, "Actually, the remarkable thing about the statement 'one has to pay one’s debts' is that even according to standard economic theory, it isn’t true, says Graeber. A lender is supposed to accept a certain degree of risk. If all loans, no matter how idiotic, were still retrievable—if there were no bankruptcy laws, for instance—the results would be disastrous. All modern nation-states are built on deficit spending. Debt has come to be the central issue of international politics. But nobody seems to know exactly what it is, or how to think about it.

The very fact that we don’t know what debt is, the very flexibility of the concept, is the basis of its power.

What is the difference between a mere obligation, a sense that one ought to behave in a certain way, or even that one owes something to someone, and a debt, properly speaking? The answer is simple: money. The difference between a debt and an obligation is that a debt can be precisely quantified. This requires money.

When we study the history of debt, then, is thus necessarily a history of money—and the easiest way to understand the role that debt has played in human society is simply to follow the forms that money has taken, and the way money has been used, across the centuries—and the arguments that inevitably ensued about what all this means. Still, this is necessarily a very different history of money than we are used to. When economists speak of the origins of money, for example, debt is always something of an afterthought. First comes barter, then money; credit only develops later.

Not only is it money that makes debt possible: money and debt appear on the scene at exactly the same time. Some of the very first written documents that have come down to us are Mesopotamian tablets recording credits and debits, rations issued by temples, money owed for rent of temple lands, the value of each precisely specified in grain and silver.

We've been looking at the debt from a historical perspective, but it's a good idea to look at it from another perspective. Ray Dalio begins it with credit, which is the giving of buying power. This buying power is granted in exchange for a promise to pay it back, which is debt. Clearly, giving the ability to make purchases by providing credit is, in and of itself, a good thing, and not providing the power to buy and do good things can be a bad thing. For example, if there is very little credit provided for development, then there is very little development, which is a bad thing. The problem with debt arises when there is an inability to pay it back. Said differently, the question of whether rapid credit/debt growth is a good or bad thing hinges on what that credit produces and how the debt is repaid (i.e., how the debt is serviced).

Almost by definition, financially responsible people don't like having much debt. In Dalio's perspective—even though he bought some assets, or when he built Bridgewater, without debt—he identifies that that’s not necessarily true, especially for society as a whole (as distinct from individuals), because those who make policy for society have controls that individuals don’t. He learned that too little credit/debt growth can create as bad or worse economic problems as having too much, with the costs coming in the form of foregone opportunities.

Generally speaking, says Dalio, because credit creates both spending power and debt, whether or not more credit is desirable depends on whether the borrowed money is used productively enough to generate sufficient income to service the debt. If that occurs, the resources will have been well allocated and both the lender and the borrower will benefit economically. If that doesn’t occur, the borrowers and the lenders won’t be satisfied and there’s a good chance that the resources were poorly allocated.

In assessing this for society as a whole, one should consider the secondary/indirect economics as well as the more primary/direct economics. For example, sometimes not enough money/credit is provided for such obviously cost-effective things as educating our children well (which would make them more productive, while reducing crime and the costs of incarceration), or replacing inefficient infrastructure, because of a fiscal conservativism that insists that borrowing to do such things is bad for society, which is not true.

Credit/debt that produces enough economic benefit to pay for itself, in Dalio's view, is a good thing. But sometimes, the trade-offs are harder to see. If lending standards are so tight that they require a near certainty of being paid back, that may lead to fewer debt problems but too little development. If the lending standards are looser, that could lead to more development but could also create serious debt problems down the road that erase the benefits.

Suppose that you, as a policy maker, choose to build a subway system that costs $1 billion. You finance it with debt that you expect to be paid back from revenue, but the economics turn out to be so much worse than you expected that only half of the expected revenues come in. The debt has to be written down by 50 percent. Does that mean you shouldn’t have built the subway?

Rephrased, the question is whether the subway system is worth $500 million more than what was initially budgeted, or, on an annual basis, whether it is worth about 2 percent more per year than budgeted, supposing the subway system has a 25-year lifespan. Looked at this way, you may well assess that having the subway system at that cost is a lot better than not having the subway system.

To give you an idea of what that might mean for an economy as a whole, really bad debt losses have been when roughly 40 percent of a loan’s value couldn’t be paid back. Those bad loans amount to about 20 percent of all the outstanding loans, so the losses are equal to about 8 percent of total debt. That total debt, in turn, is equal to about 200 percent of income (e.g., GDP), so the shortfall is roughly equal to 16 percent of GDP. If that cost is “socialized” (i.e., borne by the society as a whole via fiscal and/or monetary policies) and spread over 15 years, it would amount to about 1 percent per year, which is tolerable. Of course, if not spread out, the costs would be intolerable.

For that reason, says Dalio, that the downside risks of having a significant amount of debt depends a lot on the willingness and the ability of policy makers to spread out the losses arising from bad debts. Whether policy makers can do this depends on two factors: 1) whether the debt is denominated in the currency that they control and 2) whether they have influence over how creditors and debtors behave with each other.

By studying the global monetary system ('Bretton Woods') in 1966–1971, the inflation bubble of the 1970s and its bursting in 1978–82, the Latin American inflationary depression of the 1980s, the Japanese bubble of the late 1980s and its bursting in 1988–1991, the global debt bubbles that led to the 'tech bubble' bursting in 2000, and the Great Deleveraging of 2008, the collapse of the Roman Empire in the fifth century, the United States debt restructuring in 1789, Germany’s Weimar Republic in the 1920s, the global Great Depression and war that engulfed many countries in the 1930–45 period, and many other crises, Dalios sees that each case of a certain type of disease unfolding as 'another one of those.'

Throughout history, only a few well-disciplined countries have avoided debt crises. That’s because lending is never done perfectly and is often done badly due to how the cycle affects people’s psychology to produce bubbles and busts. While policy makers generally try to get it right, more often than not they err on the side of being too loose with credit because the near-term rewards (faster growth) seem to justify it. It is also politically easier to allow easy credit (e.g., by providing guarantees, easing monetary policies) than to have tight credit. That is the main reason we see big debt cycles. Debt crises are inevitable, and, according to Dalio, come in cycles. You create a cycle virtually, anytime you borrow money. Buying something you can’t afford means spending more than you make. You’re not just borrowing from your lender; you are borrowing from your future self. Essentially, you are creating a time in the future in which you will need to spend less than you make so you can pay it back. The pattern of borrowing, spending more than you make, and then having to spend less than you make very quickly resembles a cycle. This is as true for a national economy as it is for an individual. Borrowing money sets a mechanical, predictable series of events into motion. Economies whose growth is significantly supported by debt-financed building of fixed investments, real estate, and infrastructure are particularly susceptible to large cyclical swings because the fast rates of building those long-lived assets are not sustainable. 

Economists generally speak of three functions of money: medium of exchange, unit of account, and store of value. The story of money for economists always begins with a fantasy world of barter. The Myth of Barter cannot go away, because it is central to the entire discourse of economics.

Once economics had been established as a discipline, the theological arguments no longer seemed necessary or important. People continue to argue about whether an unfettered free market really will produce the results that Adam Smith said it would; but no one questions whether 'the market' naturally exists. The underlying assumptions that derive from this came to be seen as common sense—so much so that, we simply assume that when valuable objects do change hands, it will normally be because two individuals have both decided they would gain a material advantage by swapping them.

Recall here what Adam Smith was trying to do when he wrote The Wealth of Nations. Above all, the book was an attempt to establish the newfound discipline of economics as a science. This meant that not only did economics have its own peculiar domain of study—what we now call “the economy,” though the idea that there even was something called an “economy” was very new in Smith’s day—but that this economy operated according to laws of much the same sort as Sir Isaac Newton had so recently identified as governing the physical world. Newton had represented God as a cosmic Watchmaker Who had created the physical machinery of the universe in such a way that it would operate for the ultimate benefit of humans, and then let it run on its own. Smith was trying to make a similar, Newtonian argument. God—or Divine Providence, as he put it—had arranged matters in such a way that our pursuit of self-interest would nonetheless, given an unfettered market, be guided 'as if by an invisible hand' to promote the general welfare. Smith’s famous invisible hand was, as he says in his Theory of Moral Sentiments, the agent of Divine Providence. It was literally the hand of God. And Allah knows best."

The roosters had woken up, and were preparing to take a breath, to sound the dawn call. The moon retreated while chanting,

I was just guessing at numbers and figures

Pulling the puzzles apart

Questions of science, science and progress *)

Citations & References:
- M. Lindsay Kaplan (ed.), The Merchant of Venice: Texts and Contexts. 2002, Palgrave
- Jay L. Halio, Understanding The merchant of Venice: a Student Casebook to Issues, Sources, and Historical Documents, 2000, Greenwood Press
- David Graeber, Debt: The First 5,000 Years, 2014, Meliville
- Ray Dalio, A Template for Understanding Big Debt Crises, 2018, Bridgewater
*) "The Scientist" written by Jonathan Mark Buckland, Guy Berryman Rupert, William Champion & Christopher Anthony John Martin
[Session 2]
[Session 1]

Bahasa